Commission clears Linde merger with Praxair subject to conditions

22-Aug-2018 - Germany

The industrial gases group Linde is making progress in its planned multi-billion-euro merger with its US competitor Praxair. The EU Commission's competition authorities approve the planned merger to form a new industry giant, the authority announced in Brussels on Monday. However, they require the fulfillment of conditions. Praxair must sell its entire gas business in the European Economic Area and divest its stake in the Italian joint venture Siad. In addition, helium supply contracts are to be sold.

As notified, the merger would have led to a significant reduction in the number of suitable alternative suppliers and thus to potential price increases, the EU Commission explained.

Gases such as helium and oxygen are used in a wide range of products such as steel production and hospitals, Competition Commissioner Margrethe Vestager said. "There are very few companies in the world that can supply all these gases." The commitments offered by Linde and Praxair removed the competition concerns.

However, the planned merger is not yet in dry wipes. In particular, the US competition authority FTC, but also cartel guards in Brazil, Argentina, South Korea, India and China must give the green light for the deal to succeed. On the stock exchange, Linde shares rose only briefly following the news from Brussels.

Linde announced at the beginning of August that the FTC was demanding further disposals of businesses. For such sales, Linde and Praxair had agreed on a sales volume of EUR 3.7 billion. The threshold could be crossed, it was said at that time.

Negotiations are underway with the Americans. Linde did not want to speak any further on Monday. Time is pressing: According to the Securities Act, the merger must be completed by 24 October at the latest.

With the merger, Linde and Praxair intend to forge the world's largest gas producer - ahead of their French competitor Air Liquide. With 80,000 employees and an annual turnover of 28 billion euros, the new company would dominate a quarter of the world market. Praxair is the market leader in the USA, Linde is strong in Europe and Asia, in the US medical business and in plant construction.

Linde and Praxair had already sold stores to meet the competition authorities: While Praxair sold a large part of its European business to its Japanese competitor Taiyo Nippon Sanso, Linde sold the lion's share of its US business to the German company Messer and the financial investor CVC.

The Dax Group employs 58,000 people worldwide and produces carbon dioxide for beer and sparkling water, oxygen for hospital patients and plants for the petrochemical industry. With the merger, the two companies want to leverage economies of scale and achieve higher profit margins. Linde and Praxair expect synergies of EUR 1.1 billion per year.

Employee representatives are critical of the merger. The union IG Metall fears the reduction of up to 10,000 jobs and fears for co-determination rights if the new Linde plc moves to Dublin as planned and is managed by Praxair boss Steve Angel. Linde Supervisory Board Chairman Wolfgang Reitzle, on the other hand, was optimistic that the deal would create new jobs./as/DP/she (dpa)

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